The Key to Effective Risk ManagementWed, 01/21/2015 - 10:42
Business leaders face a range of unique challenges, such as economic uncertainty, disruptions in the supply chain, fluctuations in the prices of raw materials, cyber-security, regulatory changes, rising healthcare costs, and terrorism. It is vital that companies learn how to effectively manage risk, which goes well beyond simple insurance since, when done correctly, it creates opportunities for cost control, the effective allocation of capital, and ultimately the promotion of sustainable growth. This risk management approach is the result of over 30 years of constant innovation that is now being accelerated by techniques and tools that did not exist before the advent of big data and analytics. However, for a risk management program to be effective, companies must ensure they fully understand their business goals, risk tolerance, the true risk factors affecting the company, and the balance between insured risks and working capital. This is why Marsh, a leading insurance broker, has devised the Marsh 3D plan, which outlines the three steps companies should take when building an effective risk management strategy.
DEFINE: BUILD UNDERSTANDING
This step consists of analyzing the risk management strategy by considering a company’s priorities. This is accomplished through specific questions that seek to fully understand a company’s business strategy and risks involved. This initial effort helps to evaluate whether risk management strategies and insurance policies are aligned with company goals. This stage does not only identify traditionally insurable risks, but also non-insurable risks, such as operational and strategic threats.
DESIGN: ASSEMBLE AN IMPLEMENTATION PLAN
Once the critical risks have been identified and prioritized, companies must select their strategies and design an implementation plan. The identified solutions may include a variety of approaches to consulting and risk transfer designed to meet both insurable and noninsurable risks.
DELIVER: PROVIDING RESULTS
The third step is where the benefits of thoughtful analysis and planning become clear. The program should provide expert advice over time, from the selection of the policy to industry analysis and the administration of claims. At the end of this process, the customer obtains a detailed and enforceable plan and expert advice on the steps to take to achieve optimal risk management.
Marsh 3D allows a set of solutions to be tailored to companies’ specific risks and business priorities across a disciplined, multi-year approach. The 3D cycle is completed once the results of the previous year are evaluated against the latest analysis. The main goal of Marsh 3D is to maximize the return from investing in risk management through increased efficiency, improved decision-making, and reduced costs.
In Mexico, the recent transformation of the oil and gas sector requires a detailed analysis as well as the experience and knowledge of an expert consultant such as Marsh Brockman and Schuh, Marsh’s Mexican insurance broker, which offers its customers an innovative risk management model. Marsh 3D focuses on precise objectives such as the dynamics of the oil and gas industry and the risk profile of each company involved. Therefore, Marsh states that this 3D strategy delivers a comprehensive and efficient risk management solution, which goes beyond simply protecting oil and gas companies against unwanted risks.